The most common question asked when talking about mortgages is… “What are today’s rates?”
Ever ask yourself what determines these rates?
Here is a quick list of what goes into determining the interest rate on your mortgage:
- Loan Amount – Loans over conventional limits are called Jumbo Loans and may have different pricing. This pricing can be both better and worse. It is also worth noting that smaller loans (ie. loans under $100K) may also be priced differently by lenders.
- Credit Score – The better your credit score the better your rate will be.
- Debt to Income Ratio (DTI) – If your DTI is high at or close to 50% you may be charged a higher interest rate. This is a function of the risk associated with lending someone money with less disposable income than another.
- Loan Type – Is this a Purchase Money Mortgage or A Refinance? If a Refinance are you taking cash out of the property or just paying off your current mortgage?
- Length of Loan Term – Shorter Term Loans will typically have better interest rates than longer termed loans. A 15yr Fixed Rate Mortgage should just about always have a better rate than a 30yr Fixed Rate Mortgage
- Income Documentation Provided – The most common factor here is when a self-employed borrower writes a lot of paper expenses off on his or her tax return. Some lenders will allow a self-employed borrower to qualify for a mortgage using a percentage of deposits on their business bank statements to qualify. When you are using alternative forms of income documentation your rate can go up.
- Property Type – Do you live in this home or is it a secondary residence or investment. These are all factors to pricing with your owner-occupied residence always getting the best pricing. This goes even one step further with is the home a Single Family House, A Condo, a Multi-Family Home, etc. The style of home you live in is also factored into your pricing.
Other Factors Influencing Rates:
- Economic Data
- Stock Market
- The Federal Reserve
- World Events
Do you want to learn more about interest rates or work with a lending partner that really understands the market? Give us a call.